The response of an endogenous system to an exogenous shock. This is an important topic in time-series econometrics.
Questions tagged [impulse-response]
109 questions
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Interpretation of Impulse Response and Variance Decomposition Graphs
I am finding it difficult to interpret the following Impulse response and variance decomposition graphs-basically studying the effect of currencies on each other(I know the results from the Granger causality test,but how do we interpret the graphs…
Bun
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How to estimate vector autoregression & impulse response function with panel data
I am working on vector auto-regression (VARs) and impulse response function (IRFs) estimation based on panel data with 33 individuals over 77 quarters. How should this type of situation be analyzed? What algorithm's exist for this purpose? I…
Rom
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How to calculate the impulse response function of a VAR(1)? (With example)
How to calculate:
1) Simple IRF
2) Orthological IRF (Y2 -> Y1)
Of an unrestricted VAR(1) model:
$Y_{1, t} = A_{11}Y_{1, t-1} + A_{12} Y_{2, t-1} + e_{1,t}$
,
$Y_{2, t} = A_{21}Y_{1, t-1} + A_{22} Y_{2, t-1}+e_{2,t}$
Let's just say that $A_{11} =…
Dole
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Why Are Impulse Responses in VECM Permanent?
The usual interpretation of impulse response functions in standard vector autoregression (VAR) models is that they represent the response of a variable, say $y_t$, to a shock of one standard deviation (or one unit, depending on how they are…
Antony Cube
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4
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Interpretation of the Impulse Response Function - VAR Estimation
I have some issues while discussing and interpreting this impulse response function (the graphics analysis). What do they mean and represent economically? What can the conclusions be?
Basically initially I had the time series of government spending…
Angela Francesca Papa
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4
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2 answers
Is normality of residuals necessary for drawing conclusions from Impulse Response function
I know the issue of normality of residuals has been discussed here quite a lot, and I've learned that there are some cases in which it can be a less important hypothesis to test, while more critical in others (see for example here and especially…
Polina Sklyarevsky
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Interpretating IRF correctly
We have following Impulse Response Function:
# Load data and apply VAR
library("vars")
data(Canada)
data <- Canada
data <- data.frame(data[,1:2])
var <- VAR(data, p=3, type = "both")
plot(irf(var, impulse = "e", response = "prod", boot = T,…
WolfgangRetry
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4
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Interpreting VECM impulse response function
I have plotted IRF in stata with response S&P500 and impulse treasury bill rate. According to the model they are positively related. However, my irf graph is below zero(see the graph below). How do I interpret such a result?
Mansur
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Interpreting VAR impulse response
In R, I have two variables, x and y, and a basic VAR model with just one lag, i.e. (as I understand it) the model basically is:
x(t) = a*x(t-1) + b*y(t-1) + c + error1
y(t) = d*x(t-1) + e*y(t-1) + f + error2
with a,b,c,d,e,f some constants.
How do…
Arvo P.
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How to calculate impulse responses for a given autoregressive process?
Is there a possibility to use a recurrent equation to calculate the impulse responses for an AR(p) process?
$$Y_t = \rho_1Y_{t-1} + \ldots + \rho_pY_{t-p} + e_t $$
It is quite a theoretical question, but I do not know how to start with the AR(1)…
OST_EE
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4
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Orthogonalized impulse response's contradictory forms in a VAR(p) model
I have so far discovered three different ways of utilizing the Cholesky decomposition for calculating the OIRFs of a VAR(k). The different methods seem contradictory so I would like some input on where I am making the mistake. First, all methods use…
Dole
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Significance of an impulse response function
I've read several paper that all compare different cumulative IRF of the same VAR equation for statistically significant difference.
The IRF they use are simply the sum of the coefficients of the VMA representation resulting from Cholesky…
Ahlerich
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3
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Impulse response: Interpreting shock and response for log-variables
I have a question related to the interpretation of Impulse Response Function (IRF) functions. Assume we do have two time-series that have been both log-transformed and are stationary. When applying a IRF in the vars package, how do we "read" the x…
RaymondD
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Granger Causality & Impulse Response Function
How does an Impulse Response function relate to Granger causality?
Is it not basically a visualization of what we measure with Granger causality? (see http://statsmodels.sourceforge.net/devel/vector_ar.html)
Christopher
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Meaning of determinant of matrix of impulse-response functions in a VAR
Suppose there is a structural VAR model, such as:
$A y_{t} = B y_{t-1} + \varepsilon_{t}$, where $\varepsilon_{t} \sim N(0, I_{n})$; then the matrix representing the contemporaneous impulse-response function to the structural shocks…
Douglas K
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